Investment Idea: IDSU

[brewer12345]

OK, I've been busy lately with little time to post, but here's a quickie. The company is Imperial Sugar, a refiner and marketer of sugar. They went bust a few years ago and have emerged as a leaner, healthier company with virtually no debt. Book value is $18 a share, versus the ~$13 current price. I can't think of a way that this company could possibly be worth less than ~$14 per share, even if you busted the thing up and distributed the proceeds to shareholders. I am a serious cheapskate, so I will wait for the next gap down and hope to buy it in the vicinity of $11.

Plus you would get to use all those Homer Simpson sugar episode quotes: "the strong must protect the sweet" and "first you get the sugar, then you get the money, then you get the woman"

 

[Martha]

So Brewer, how is the new job?

 

[laurence]

U.S. based? Sugar has a nice fat tarriff on imports, artificially raises the price, thus the profit margin. There has been talk lately of removing the tarriff, maybe that uncertainty is depressing the price?

 

[brewer12345]

Job's not too bad so far, just fairly heavy hours and I am also studying for CFA level III, so I am busy and exhausted.

Yep, IDSU benefits from the tariff. I suspect that the tariff won't go away any time soon, given the sugar industry lobby and all the pandering Congress does to agriculture. If it does, IDSU is still worth almost the full value of the current stock price if you haircut the PP&E and liquidate everything else into cash. If you get it at 11 or less, it is even safer.

 

[wildcat]

Gotta love the competitive advantage a company builds during bankruptcy.  Brewer, I have been reading pretty good things on this one and the CEO seems to have a pretty solid plan.  However, I tend to get a bit weary with companies that are tied to a commodity.  You think the stock is so cheap the price of sugar doesn't matter?  Or are they in a business that is protected from price swings? Or are they hedged?  By the way I have been   at GIM's price as of late.    

 

[brewer12345]

IDSU: I think that at 11 to 12, it is so cheap that I am willing to take a flier on sugar prices.

GIM: Enh, just a little volatility. I'm in it as a diversifier (<10% of port) and its nice to be able to buy at a discount to NAV.

 

[preben]

I bought my first batch of GIM around 9.0. I was happy to average down a bit cheaper later on. Great diversifier, low e/r and has recently moved more towards Asia (while still holding EU Etc.) and selling at a discount still. And 5-6% div too+good experienced management. Good fit for people wanting to also diversify their bond part of portfolio. Cheers!

 

[wildcat]

GIM: Enh, just a little volatility. I'm in it as a diversifier (<10% of port) and its nice to be able to buy at a discount to NAV.

No complaints...good buying opportunity

 

[Nords]

Re: Investment Idea: IPSU

I am a serious cheapskate, so I will wait for the next gap down and hope to buy it in the vicinity of $11.

Yikes, Brewer, I sat on my assets for a couple days before I got around to researching IPSU, and guess what the first news article was:

Ridgeland, MS, MAY 19, 2005 (EventX/Knobias.com via COMTEX) -- Schultze Asset Management LLC, which owns a 14.4% stake in Imperial Sugar Co. (IPSU), has offered to acquire the remaining outstanding shares of the company for $17 a share in cash, according to an amended Schedule 13D filed with the SEC. Schultze requires that the company's board respond to its proposal by next Wednesday.

Looks like you weren't the only one keeping an eye on the prize-- hope you didn't wait for the gap down! And next time you recommend a stock, I'll get right on the research.

Maybe it's better this way-- you probably would have been subpoena'd by the SEC the next morning...

 

[laurence]

Oh now that wouldn't be so bad, I hear camp cupcake is lovely, and they give out lovely knit ponchos as parting gifts!

 

[brewer12345]

Dammit! I really shouldn't torture myself with good ideas unless I am actually willing to sell something else to buy the new thing I have found. Looks like someone with a lot more money got to IPSU first. Nice to know my nstincts are generally good. Maybe next time...